Striking the right partnership in developing NHS private patient units

First published on Healthcare Markets.

The expansion of private patient units within NHS hospitals offers an opportunity to increase revenues for trusts, but often successful projects rely on strong partnerships between the public and private sectors. Carly Caton, commercial healthcare partner at UK and Ireland law firm Browne Jacobson, and Dr David Sheridan, director of corporate development at cardiac services provider Regent's Park Healthcare, set out what this should involve. 

Self-sustainability is becoming a central theme for NHS budget holders – but partnerships will be a powerful ally in achieving this.

With Health Secretary Wes Streeting saying he no longer wants the NHS to be a drain on national resources and the extra £22.6bn cash injection for day-to-day running costs ending after this financial year, the expectation is for the NHS to soon get used to living within its means.

For public healthcare providers, they should be looking at how to couple their world-class clinical expertise, technology and facilities with the private sector's access to finance, data and international markets to drive new economic opportunities.

Developing and expanding NHS private patient units (PPUs) therefore makes strategic and financial sense for both trusts and independent healthcare providers. PPUs normally operate within or alongside their NHS hospitals, offering private healthcare services to patients who are willing to pay, with their unique proposition lying in allowing NHS trusts to leverage their wealth of expertise, cutting-edge technology and clinical talent while reinvesting the revenue generated back into the NHS.

Many PPUs find the need for additional capital and expertise barriers to expansion, so look to private sector healthcare providers to partner with. Here, we examine the practical steps required to make PPU partnerships a reality, drawing on insights from a recent roundtable discussion – hosted by Browne Jacobson to bring together NHS PPU managers, commercial directors and other sector experts – and real-world experience of successful PPU partnerships.

The PPU opportunity amid NHS cash shortfalls

A £37bn capital investment shortfall was highlighted in the 2024 Darzi Report, resulting in ageing buildings, technological lags and reduced productivity. Sir Jim Mackey, CEO of NHS England, has also noted that “the parlous state of the country's finances means the government can no longer afford to hand the service big uplifts every year”.

Against this backdrop, PPUs represent a significant untapped opportunity. Regent's Park Healthcare analysis shows that combined NHS PPU revenues in 2024/25 were about £850m. These are expected to grow to at least £1.2bn by 2030/31.

A 2022 report by Latchmore Healthcare Associates identified areas outside London – where PPUs comprised 8% of the private patient market in 2019, compared to 14% overall – as having the highest growth potential. Given that PPUs are ideally placed to serve high acuity or high complexity treatment, the argument is strengthened to share services in the regions, where lower private patient demand exists.

Challenges faced by PPU teams

Despite the list of benefits on offer, expanding PPUs is a perennial challenge, as we learned during the roundtable. Pre-Covid plans for new or larger PPUs were put on the backburner in many cases because of the pandemic's impact on capacity, bandwidth and resources.

Along with financial constraints, shortages of beds and a lack of ringfenced theatre space are viewed as significant challenges. Overspill has led many hospitals to accommodate private and NHS patients in the same wards.

Another issue to contend with is ideological opposition to the delivery of private healthcare within an NHS setting. This has led to some NHS boards being reluctant to ringfence capacity for private patients. Boards can oppose the development of a PPU even if it can be demonstrated that NHS patients are not impacted and private activity is profitable for the NHS.

This reluctance is reinforced by two factors. Firstly, concern around the “optics” of developing private capacity when NHS waiting lists are increasing. Secondly, a belief that the NHS should focus on its core activity of treating NHS patients.

These challenges are real and significant, but they are not insurmountable. The key lies in bringing together the right partners and developing a suitable collaborative model.

Why partnerships are the best route forward

Independent healthcare providers can offer several critical advantages to NHS trusts that address the wide-ranging challenges they face.

They can deploy capital based on a trust’s requirements, such as funding new buildings and equipment, support cash flow and share risk to protect the trust from downside while incentivising the private partner. This investment can be structured to avoid negatively impacting the trust’s capital departmental expenditure limit (CDEL).

Aside from finance, established businesses can lend operational expertise to PPUs, enhancing both patient experience and a trust’s overall reputation, particularly if the PPU can strengthen specialisms in healthcare areas such as cardiology and cancer care. In turn, this can support recruitment and retention efforts for clinicians.

When analysing examples of NHS partnerships, three critical themes emerge as essential for success.

1. Organisational and cultural fit: Vision, operating and economic models should be aligned between organisations. Independent providers will want to ensure they work with trusts that have board-level support for developing PPUs and a strong culture that values innovative approaches to healthcare problems.
2. Strategic and operational alignment: This requires commitment to a strategy that grows PPU revenues over multi-year periods and a partnership approach to opportunities and challenges. Businesses will want to ensure trusts are transparent on strategic direction and objectives that may impact the PPU, willing to consider investment in key facilities, and able to "ring-fence" capacity.
3. Consultant buy-in: Strong relationships between senior managers and consultants, who want to contribute to business development and grow their private practice, is essential.

Types of partnership and commercial models

As successful PPU examples illustrate, a wide range of commercial and legal frameworks can be used. Independent providers should develop an understanding of what each approach comprises, while careful planning and a proactive approach to risk management are essential.

Types of partnerships include:

1. Contractual arrangement: This involves a management services-type contractual agreement where a partner is brought in to run a PPU.
2. Corporate joint venture: A trust creates a new entity to expand a private patient business, which could involve using current facilities or a phased approach, and partners with an independent provider.
3. Corporate joint venture for new facility: Establishing a brand-new private hospital on trust land, entering into business together to grow and manage the private hospital together.
4. Land transaction: This involves a headlease granted by the trust, on trust land, to a developer, followed by a series of underleases to operate the PPU business.
5. Acquisition by a business: Involves acquiring hospital facilities or businesses to expand a trust’s own private patient business, potentially without a partner but sometimes involving one.

Joint ventures (JVs) can drive PPU success, unlock capital and generate strong cash flows for the trust.

A corporate JV is often structured as a limited liability partnership between the private partner and the trust, with the JV purchasing services from the trust through service level agreements and management services from the partner via a managed services agreement.

An example of this partnership can be found in Regent's Park Healthcare's Dorset Heart Clinic joint venture with University Hospitals Dorset (UHD), which has been highly successful while maintaining quality patient care.

Procedure volumes have grown 13% annually and revenues are up by 17% on average between 2017/18 and 2024/25.

The clinic was rated "good" by the CQC in 2022 and 97% of patients would recommend it to friends and family. It has a dedicated clinical director and Medical Advisory Committee, and is fully integrated with the UHD cardiology team.

When considering procurement matters, a trust must look at what it is intending to do and whether it is “procuring” anything or granting a concession to the private partner.  

The correct route will be different on a case-by-case basis depending on the proposed structure of the partnership and what the trust is looking to achieve.  

UHD, for example, used a competitive flexible procedure to procure a new JV partnership across a multi-stage procurement process that includes a 10-year concession and special regime contract.

Next steps

For independent providers wishing to work with NHS PPU teams, they should choose trusts that have assessed their strategic position and secured internal buy-in from boards and clinicians for new PPU projects.

This should help to establish the foundations of a close working relationship, while evaluating the various partnership structures and jointly developing a robust business case is essential to ensuring new and expanded PPUs are a success.

Such projects offer a promising avenue to enhancing trust finances, sharpening independent provider competitiveness and improving patient care for all. The question is no longer whether to pursue PPU expansion, but how to do so in a way that maximises benefits while managing risks effectively for all parties.